Samsung Electronics Co. won orders to produce desktop processor chips for Intel, gaining a meaningful impetus to strengthen its relatively weak foundry business.

Intel has been struggling to keep up with the booming demand in PC CPUs and has reached out to the world’s two biggest foundries, TSMC of Taiwan and Samsung Electronics, to share some of the load, according to industry sources Thursday.

Intel has outsourced the supply of basic chip components in the past but it’s the first time for the U.S. semiconductor giant to turn to outside companies for its mainstay CPUs, sources said.

Michelle Johnston Holthaus, Intel’s executive vice president, published a letter last week apologizing for the CPU shortage, saying that sustained market growth in PCs this year has “outpaced our efforts and exceeded third-party forecasts.”

The company said it has increased the use of foundries, or contract chip manufacturers, and boosted its PC CPU output by “double digits” in the second half compared to the previous six months, but that “despite our best efforts, we have not yet resolved this challenge.”

Foundry is a consolidated market with very few players. Taiwan’s TSMC is the dominant lead, covering nearly half of the demand, followed by Samsung Electronics and the U.S.-based GlobalFoundries.

Market observers say Samsung Electronics has emerged as a strong partner for Intel as TSMC maintains supply contracts with AMD, Intel’s biggest rival and the world’s No. 2 CPU maker, and Chinese telecom giant Huawei, which is subject to U.S. sanctions.

“Samsung is expected to benefit from TSMC’s tight production schedule,” said Kim Yang-jae, analyst at KTB Investment & Securities. “More chip orders are likely to come from Intel and Qualcomm next year.”

Intel and Samsung Electronics, whose business is reliant on memory chips, are neck to neck in the global semiconductor market. But the Korean tech giant, which had reigned as the world’s largest chipmaker for the past two years, is expected to lose its title to Intel this year due to sluggish memory sales.

In April, Samsung Electronics announced plans to invest $116 billion in non-memory chips through 2030, with a goal to become the world leader in not only memory but also logic chips.

By Pulse

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